Introduction
Construction projects, like any other projects, involve risks during and after their implementation. Project managers understand that during and after the implementation of their projects, there is the likelihood that unfortunate incidences or events will occur.
Organizations refer to these unfortunate events as risks. When project managers do not handle the risks in a way that protects the business from making loses, it makes the whole project to be unproductive. Project managers have to identify risks that they expect, analyze them, and propose measures to reduce their effects.
In some cases, when the project managers properly apply certain measures to manage the risks that they expect, it is likely that the risks and their effects will not occur. The way the project managers in construction projects handle the identified risks is proportional to the success of the project.
Statistics by Voetsch, Cioffi, and Anbari (2004) have established a significant relationship in the way project managers handle the available risks and the success of the project.
This paper identifies some of the possible risks in construction projects such as the Empire State Building, analyzes them, and identifies the possible measures to manage them.
Sources of risks at the Construction of the Empire State Building
Identifying risks or source(s) of the risks is the first major step that project managers take in the entire process of risk management. Project managers can identify a risk by brainstorming, reviewing literature, and personal experiences.
Depending on the nature of the project, the managers will come up with the possible sources of the risk (Cooper, Grey Raymond, & Walker, 2004). In the construction of the Empire State Building project, various sources of risks can be identified.
In a construction project, most of the risks are unavoidable because construction projects in some situations take a longer time to complete (Burtonshaw-Gunn, 2009).
In proportion to the complexity of the construction projects, project managers can categorize sources of risks in various groups. The first category of sources of risk is the technical risks.
The second category is the project management risks, third is the organizational risks, while the last category is the external risks (Burtonshaw-Gunn, 2009). Below is a detail explanation of these categories and their likely risks.
Technical risks
Generally, “technicality, performance, or quality” (Burtonshaw-Gunn, 2009, p. 44) of a project can be a source of risks in a construction project. Technical risks are risks relating to the available technology, the goals set, and the company’s decision to rely on unreliable technology (Burtonshaw-Gunn, 2009).
The goals set by the managers may prove to be unrealistic, especially during the implementation process. For instance, a manager may need to complete the whole project after two years and yet the technology that he employs is not reliable.
Construction projects require the best and up-to-date technologies for attainment of better results. Technology is unreliable if it is not proven to be of quality, or if it is very complex.
In addition, the technology may be unreliable if it compromises the company’s standards during and after the implementation of the project (Burtonshaw-Gunn, 2009).
When the project managers do not identify the sources of the technical risks, they expose the whole project to various challenges.
First, the deadline for the project completion may not be met. This is because the technology that the company is relying on may become expensive, strain the company’s resources, and force it to explore ways of managing the challenge before proceeding.
Secondly, technical risks compromise the standards of the project if the technology changes before full implementation of the project. Changes in technology may alert managers that the project is of low standards and force project managers to review their plan.
Risks from project Management
The aim of a project is to help an organization to achieve its objectives (Hillson, 2009). Proper management of a project helps the organization to ensure that it does not deviate from its main objective.
The increasing competition in the corporate world requires project managers to plan effectively for any project and asses its effectiveness before including it into its strategic plan. Poor project planning or management exposes the organization to different risks.
Poor management of the organization is likely to affect any project within that organization. In addition, in the project management process, project managers can make some mistakes that increase risks to the project.
Risks from poor management can result from poor allocation of project resources (Burtonshaw-Gunn, 2009). When a project manager does not effectively account for resources in the process of project implementation, the whole project is put at risk of failing.
In addition, lack of integrity and transparency can lead to misuse of project resources and hence threaten the success of the project.
Lastly, some project managers may not share the resources to various sections of the project well. This may make the entire process of implementing the project to slow down because project sections are always interdependent.
Underutilization of all the disciplines of a project and low quality project plans are other sources of risk to a construction project (Burtonshaw-Gunn, 2009). A project manager has to ensure that disciplines in a project relate easily to enhance work teams and reduce workload.
When the disciplines do not work together as a system, there are chances that the organization will face different risks. For example, there is the risk of an increase in errors by different disciplines participating in the implementation of a project.
Low quality plans also affect the success of a project. A good project manager should draft a project management plan that clearly outlines the requirements of the project. The plan should identify the possible risks of the project from the implementation stage to the completion stage.
In addition, the plan should prescribe various measures to reduce possible risks (Burtonshaw-Gunn, 2009).
Risks from the organization
In construction projects, the organization is another source of risks. Every organization has got factors that can expose it to risks in the process of implementing a project.
Some of the common organization factors that can cause risks include low funds, conflicting projects, costs, time, inconsistent objectives, and, “lack of project prioritization (Burtonshaw-Gunn, 2009, p. 44). These factors represent the existing conflicts in an organization.
If a contractor experiences these factors in an organization that they are working for, he may be forced to reschedule his plans. Rescheduling of plans interferes with deadline of project completion and increases the cost of the project.
Conflicting projects, inconsistent objectives, inadequate funds, and poor prioritization of the project are other factors that can interfere with successful project implementation. Conflicting projects result when an organization attempts to run more than one project concurrently.
In such cases, the organization may fail because the resources available may not sustain more than one project at a time. This may also make the organization to put some projects on low priority status. This scenario may deny project stakeholder support which may in turn starve it of funds form successful implementation.
Lastly, inconsistent objectives in an organization are a source of risks to the project. Project managers have to ensure that they achieve their objectives and review them regularly to ensure they remain consistent.
Inconsistent objectives may hamper timely execution of the project. This in turn causes the risk of increase in the cost of implementing the project and sometimes reduces its quality.
Risks from external sources
External forces also pose risks to projects in an organization. External forces are outside the organization and the organization has less control over them. External factors are likely to cause higher risks to an organization’s projects, unlike other sources of risks.
Some of the common risky external factors include force majeure, changes in the legal or regulatory frameworks, changes in the labor requirements, risks in a country, and the project owner’s priorities (Burtonshaw-Gunn, 2009).
Legal and regulatory frameworks are very risky external factors. A government may pass laws to regulate construction projects in a country. The laws may include the standards that the contractors should adhere to.
Such legal frameworks force an organization to spend more to meet the requirements. In addition, the organization may face court cases if it does not meet the legal.
Table 2.1: A summary of techniques to identify risks in the construction of an empire state Building
Systems to address risks at the Construction of the Empire State Building
In construction projects, there are many risks that an organization should expect. Most of these risks happen as a result of external forces (Bubshait & Al-Atiq, 1999). Therefore, it is better to apply systems that will ensure proper management of risks to help minimize their effects.
Quality assurance system
In the process of minimizing risks in a construction project, quality assurance systems help to produce quality products and services because they prevent inefficiencies that could result in the production of low quality goods (Bubshait & Al-Atiq, 1999).
In this system, every individual in the construction project should demonstrate “a systematic quality work” (Bubshait & Al-Atiq, 1999, p. 41). Quality work will enhance uniformity in the work done by various subcontractors on the project.
Quality standards reduce the recurrence of a risk that may raise the cost of a project. This helps a contractor to give the client confidence in the whole project. An example of a quality assurance standard that one can apply in a construction project is the ISO 900 standard.
The standard obligates the constructor to show commitment to quality and work toward realizing customer’s requirements (Bubshait & Al-Atiq, 1999).
This system reduces risks that a corporate can encounter in construction because it emphasizes objective inspection, proper contract review, admitting of any failure, and proper handling of construction materials.
In this case, the system reduces risks that originate from external sources, project management, and inside the organization (National Research Council, 2005).
Planning
Better planning is essential in the successes of a project. Project managers have to set effective goals, ways to achieve them, and the means that will be used to measure the achievements. In construction projects planning is important to reduce risks and assure clients of quality products (Cooper et al., 2004).
Through planning, a project manager will develop and incorporate risk management measures into the project plan. Effective planning will ensure that the manager proposes effective measures to deal with any risks that the firm expects.
Planning ahead will help a contractor design effective goals, have enough time to assess the project team members, and interact with the vendors in advance to check on the cost of materials. Early checking of costs with the vendors reduces the risk of increasing the cost of the project at a future date.
Early planning will also prevent the organization from developing conflicting projects and have enough time and space for the prioritization of a project. Therefore, advance planning reduces organizational risks, risks from project management, and performance of the project.
Catastrophic Failure Fault Tree on Low resources
In the construction of the Empire State Building, low or scarcity of resources is a catastrophic failure to this project. Construction of the Empire State Building requires that there should be consistent and timely supply of resources.
Low supply of resources directly affects the continuation of the project. Below is a catastrophic failure tree for the proposed construction project.
Discussion of the fault tree
Availability of resources is a determinant factor in the successes of a construction project. Enough resources will help the project managers complete their project on time and be able to meet the client’s requirements and expectations.
Conversely, low resources affect the success of a project. Project managers cannot achieve their goals at the time that they specify in their plans.
Low resources limit a construction project. There are various factors that cause the risk of low resources in a construction project. Below is a discussion of these factors as they appear in the failure fault tree above.
Scarcity of resources
Resource scarcity poses a huge problem to the successes of a project. Project managers need to plan for this risk because failure to compensate for scarce resources leads to the failure of different disciplines in the project to offer their duties on time (National Research Council, 2005).
Scarcity of resources risk in the construction of the Empire State Building can be a result of the global economic crisis or changing product prices (National Research Council, 2005).
Economic crises affect the disciplines operations. Firstly, the workers do not enjoy their work because they believe that the pay is not enough to help them survive in the current economy.
Secondly, the company may decide to invest in projects that will yield quick profit to cater for the economic crisis.
Lastly, the corporate may face an increase in liabilities as a result of the government implementing measures to stabilize the economy.
The project managers can handle this risk in various ways. The managers should constantly review the general costs of operations of the corporate to reduce the chances of economic crises (National Research Council, 2005).
The changing economic prices can also be attributed to scarcity of resource for completion of a project. Prices may increase as a result of changes in demand and supply, and changes in legal frameworks.
When prices of the products increase depending on the causative factors, there is the likelihood of the project to lack resources. Project managers can employ outsourcing strategy, purchasing in bulk, and making use of discount opportunities (National Research Council, 2005).
Increasing corporate responsibility
A corporate may adopt several projects at the same time. Such strategies impose numerous responsibilities on the corporate, which also proportionally becomes strenuous on the corporate resources.
Many responsibilities deny a corporate a chance to prioritize effectively the project leading poor planning (National Research Council, 2005).
Lack of prioritization denies a project support from stakeholders. Stakeholders need to understand the project before giving their support in terms of resources.
A project that lacks prioritization makes the stakeholders to be less confident in it, a situation that can cause them to request for postponement of such projects.
Project managers can avoid this risk by ensuring that they educate the stakeholders on the benefits of the project before and during implementation. The project should go hand- in -hand with the corporate strategies (National Research Council, 2005).
Poor planning also causes a scarcity of resources. During a project implementation process, project managers need to ensure that they work together with other project members for effective planning. Planners should set realistic goals and develop effective assessment techniques.
In addition, planning needs to be done in advance for better allocation of resources (National Research Council, 2005).
Other risks in the construction of the Empire State Building
Despite the catastrophic failure, low resources, weather, delay of material supply, and force majeure are some of the smaller risks project managers can encounter in the construction of the Empire State Building. The project manager needs to employee favorable measures to handle weather risk.
For example, use of technologies suitable to handle certain weather changes. Managers can avoid delay of material supply by making advance purchases. It is not easy to prepare for force majeure risks but the project manager should allocate extra resources for risks in this category.
Below is a table summarizing risks project managers can encounter in the project of construction of an empire state building:
Table 5.1: A summary of empire building construction project risks
Conclusion
Like any other construction project, the construction of the Empire State Building has a high probability of encountering different kinds of risks.
These risks originate from within the organization, outside the organization, from the project managers, and the performance of the project. Lack of resources emerges to be a catastrophic fault failure.
Therefore, by applying the suggested measures it will help in reducing the risks that come with the construction of an empire state building.
References
Bubshait, A. A., & Al-Atiq, T. H., (1999). ISO 900 standards in Construction. Journal of Management in Enginerring, 15(6), 41-48.
Burtonshaw-Gunn, S. A. (2009). Risk and Financial Management in Construction. Aldershot: Gower Publishing, Ltd.
Cooper, D.F., Grey, S., Raymond, G., & Walker, P. (2004). Project Risk Management Guidelines: Managing Risk in Large Projects and Complex Procurements. New York: John Wiley.
Hillson, D. (2009). Managing Risk in Projects. Aldershot: Gower Publishing, Ltd.
National Research Council (U. S). (2005). The Owner’s Role in Project Risk Management. Washington, DC: Academies Press.
Voetsch, R. J., Cioffi, D. F., & Anbari, F. T. (2004). Project risk management practices and their association with reported project successes, Proceedings from IRNOP. Web.